Don’t Underestimate the Power of Your State Pension

When we speak with clients, we often find that the value of the State Pension is overlooked. Yet in today’s climate of high inflation and market uncertainty, this guaranteed, index-linked income is an important element of retirement planning.

What You Get

If you reach State Pension age (currently 66) after 6th April 2016, the full State Pension offers a guaranteed income of £230.25 per week—that’s nearly £12,000 a year! And thanks to the government’s triple lock guarantee, it will rise each year by the highest of national average earnings, the Consumer Prices Index (CPI), or 2.5%. This year, the government has confirmed the triple lock will remain in place, ensuring a substantial increase.

To put that figure into context, an individual aged 66 in good health would require a pension fund of at least £200,000 at current annuity rates to be able to provide an equivalent level of guaranteed, index-linked income.

Qualifying for the Full State Pension

To receive the full amount, you’ll need 35 years of National Insurance (NI) contributions, with a minimum of 10 years to receive anything. These contributions are typically made through employment, but you might also gain NI credits for periods like:

  • Raising children
  • Caring for family
  • Illness or disability
  • Unemployment

Family members who help care for a child under 12 while the parents work (like grandparents) may also qualify for Specified Adult Childcare credits—an often-overlooked benefit since 2011.

Filling Gaps in Your Record

If your NI record has gaps, there’s good news: you can make voluntary contributions to boost your State Pension. While usually limited to gaps from the past six years, there was a special window (now closed) to cover older gaps for those born after April 1951 (men) or April 1953 (women).

The cost of filling these gaps ranges from £3.15 to £15.85 per week, but the return can be significant—each year filled adds around £5.29 per week to your State Pension. Over time, this is a sound investment in your financial security.

Case Study: How Jane Boosted Her State Pension

 Jane, a 65-year-old client, came to us concerned about her retirement income. She had built up 30 years of National Insurance (NI) contributions—five years short of the 35 needed for the full State Pension.

After checking her NI record, we found she could claim three years of credits for the time she spent caring for her grandchildren. This left her just two years short.

To fill the gap, Jane made voluntary contributions, costing her a total of £1,647.20.

Here’s the difference it made:

  • Before: £9,924 annually (£190.85 per week)
  • After: £11,973 annually (£230.25 per week)

By spending just over £1,600, Jane secured an extra £2,049 per year for life, guaranteed and rising each year with inflation. She’ll recoup her investment in under a year and continue to benefit from the increased income for the rest of her retirement.

Check Your State Pension Today

Want to know how much you’ll receive? Use the Government Gateway to view your State Pension forecast and NI record. From there, you can claim missing credits or explore voluntary contributions.

At Chesterton House, your Financial Planner is here to help. We’ll review your State Pension as part of your overall plan, ensuring you’re making the most of every opportunity.

Got questions? Let’s discuss them at your next Progress Meeting or give us a call.

Posted on: 15th January, 2025
Posted by: The Chesterton House Team